As markets came under further pressure throughout the day it was clear we’d need to pack our case for a trip to Stop City with plenty of exit signals ready to trigger. The good news is most of them are trailing stops rather than stop losses. We have ridden some huge momentum names this year, and as we’ve often remarked, when they come undone they can often all move at once and with some force as they become highly correlated in down markets. When they do, we’re ready to act.
When you’re a trend follower you know you’ll be exiting when the trend for your timeframe is invalidated. It means you’ll never be getting out at the top. Ever. You’ll have to let something come back in order to know it’s over. So when you get that exit signal, by definition it means it’s already been doing some damage to your p&l. Wouldn’t you want to put an end to that?
Of course. So you take the signal. Every single time. When it comes to exits you don’t let the fact of whether it’s a winner or loser affect your judgment, it’s either a valid position or it’s not. When it’s not, you exit no matter what the P&L is. When it’s over, it’s over.
We got seven signals tonight, and we’ll execute them all at Wednesday’s open. As of Tuesday’s close they were showing the following returns:- $QIHU +72.0%, $KORS +21.4%, $BCR +9.4% $SSNC +9.9%, $ILMN +5.0%, $GMCR -5.5%, $ICON -6.2%.
Here are the signals:-
Qihoo 360 ($QIHU) +72.0%. Original 6/10 entry post here.
At the weekend our weekly review mentioned $QIHU had an attractive risk/reward set up for further upside to an already hugely successful position. It just shows how quickly things can change. On a longer-term basis this uptrend is intact, but for our own purposes today marked a 5-week low, a break of an ascending trendline, a break of the 50-day MA, a break of an ATR trailing stop and price stop we’d been using, and all on increased volume. That’s a lot to make excuses for. We’re happy to step aside and put our biggest winner this year in the books.
Michael Kors ($KORS) +21.4%. Original 5/6 entry post here.
It took a while for this to get going again, having faked us out earlier in the year, and until recently $KORS had continued to perform strongly. The pullback from the highs was fairly swift, as was the attempt to reverse it, putting in place the potential for a head and shoulders top if you’re in to that sort of thing. Today’s downdraft looks pretty brutal on the chart, taking out our trailing stop, as well as a previous one and the 50-day all at once.
C.R Bard ($BCR) +9.4% (incl 7/17 div $0.21). Original 5/13 entry post here.
$BCR had put together a fairly consistent trend since the breakout that triggered our entry. The failure to recover a week or so ago, as it had done on numerous occasions previously, was the first sign something bigger may be underway, and although it has retreated in a far more genteel manner than the high-beta momentum plays elsewhere in our portfolio, it has nonetheless gone far enough to trigger an exit.
SS&C Technologies ($SSNC) +9.9%. Original 6/10 entry post here.
$SSNC has been working from the beginning but not without taking us through some volatile periods with several successful tests of its 50-day. It had again looked as if it might survive, sitting just above our trailing stop and the 50-day, but sliced straight through both of them today with ease.
Illumina ($ILMN) +5.0%. Original 6/25 entry post here.
$ILMN had been cooking on a slow burn for us never quite following through on its numerous breakouts from consolidation ranges. Today’s move was a fairly straightforward breach of our trailing stop at a higher low.
Green Mountain Coffee ($GMCR) -5.5%. Original 8/2 entry post here.
This is a very marginal break of our stop, and is an example of why I sometimes express the need for a “clean break of” a given level, but in this case it coincides with a 5-week low and an ATR trail, and we’re happy to exit.
Iconix Brand Grp ($ICON) -6.2%. Original 9/5 entry post here.
$ICON had a textbook setup but never broke out with any conviction and has now invalidated with today’s break.